For any individual undertaking any transaction in India or outside India, the most critical issues are the taxability of the transaction from a tax point of view and its permissibility from a FEMA perspective.
Before addressing complex issues related to permissibility and taxability, the first step is to determine the residential status of the persons involved in the transaction.
In this write-up, we will explain and examine the legal provisions concerning residential status for any individual from both tax and FEMA perspectives.
Residential Status under the Income Tax Act, 1961
Key Criteria (Section 6 of the Income Tax Act, 1961)
Condition
Stay in India (Previous Year)
Stay in India (Past 4 Years)
Resident
182 days or more
Irrelevant
Resident
60 days or more
More than 365 days
Resident but Not Ordinarily Resident (RNOR)
120-181 days (Indian Income > Rs. 15 lakhs)
More than 365 days
Non-Resident
Less than 60 days
Irrelevant
Example Scenarios
Name
Stay in India
Income in India / Status
Arvind
200 days
Resident
Tanvi
110 days
Rs. 18 lakh – Deemed Resident (RNOR)
Nikhil
120 days
Rs. 20 lakh – RNOR
Sunita
190 days
RNOR
Residential Status under FEMA, 1999
Classification of Residents and Non-Residents under FEMA
Case
Stay in India >182 days
Residential Status under FEMA
In India for employment
Yes
Resident
In India for business/profession
Yes
Resident
Indefinite stay in India (e.g., retirement)
Yes
Resident
Leaving India for employment
No
Non-Resident
Leaving India for business/profession
No
Non-Resident
Leaving India for an indefinite stay abroad
No
Non-Resident
Example Scenarios
Name
Scenario
Alex
Moved to India for a full-time job – Resident
Anna
4-month business assignment in India – Non-Resident
Amit
Retired in India after 20 years abroad – Resident
Priya
Moved to Singapore to start a business – Non-Resident
Jamil
Working in Dubai, visits India for 80 days – Non-Resident
Conclusion
Understanding your residential status is essential for tax planning and compliance with FEMA regulations. Once your status is determined, you can assess your tax liability and permissible financial transactions accordingly.
The information provided in this document is for general informational purposes only and does not constitute legal, tax, or financial advice. While efforts have been made to ensure the accuracy and reliability of the information, applicable laws, regulations, and policies are subject to change and may vary based on specific circumstances. Readers are strongly advised to seek professional guidance from qualified legal, tax, or financial advisors before acting on any information contained herein. The author and publisher expressly disclaim any liability for any loss or damage incurred, directly or indirectly, from the use of or reliance on this material.
